nVent Fourth Quarter and Full-Year 2019 · Q4 ’19 Earnings Presentation 3 Executive Summary ROS...
Transcript of nVent Fourth Quarter and Full-Year 2019 · Q4 ’19 Earnings Presentation 3 Executive Summary ROS...
nVent Fourth Quarter and Full-Year 2019
Earnings Presentation
February 5, 2020
Forward-Looking Statement and Key Definitions
2Q4 ’19 Earnings Presentation
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This presentation contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other
than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes,"
"expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects,“ “forecasts,” "should," "would," "positioned," "strategy," "future," or words, phrases or terms of similar
substance or the negative thereof, are forward-looking statements. All projections in this presentation are also forward-looking statements. These forward-looking statements are not
guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ
materially from those expressed or implied by such forward-looking statements. These factors include the ability to realize the anticipated benefits from our separation from Pentair (the
“Separation”); adverse effects on our business operations or financial results; the ability of our business to operate independently following the Separation; overall global economic and
business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions,
including the acquisition of Eldon Holding AB; competition and pricing pressures in the markets we serve, including the impacts of tariffs; the strength of housing and related markets;
volatility in currency exchange rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and
cash flow practices; increased risks associated with operating foreign businesses; the ability to deliver backlog and win future project work; failure of markets to accept new product
introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and
the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the Securities and Exchange
Commission, including nVent’s Annual Report on Form 10-K, as amended. All forward-looking statements speak only as of the date of this presentation. nVent Electric plc assumes no
obligation, and disclaims any obligation, to update the information contained in this presentation.
KEY DEFINITIONS AND NOTES
Except as otherwise noted all references to 2019 and 2018 represent our results for the period indicated, presented on an adjusted basis. “Organic Sales" refers to GAAP revenue
excluding (1) the impact of currency translation and (2) the impact of revenue from acquired businesses recorded prior to the first anniversary of the acquisition less the amount of sales
attributable to divested product lines not considered discontinued operations. “Segment Income” represents Operating Income exclusive of non-cash intangible amortization, separation
costs, certain acquisition related costs, costs of restructuring activities, impairments and other unusual non-operating items. Return on Sales ("ROS") equals Segment Income divided by
Sales. See appendix for GAAP to non-GAAP reconciliations.
3Q4 ’19 Earnings Presentation
Executive Summary
ROS expansion and strong cash generation
Q4 ‛19
Full-Year 2019
Q4 Segment Call-outs
Sales of $567 million, flat year-over-year, down 3% organically
ROS was 19.2%, expanded 10 bps
Adjusted EPS of $0.47, up 4%
Delivered strong Free Cash Flow of $169 million
EFS grew sales 3% organically and expanded ROS by 130 bps
Thermal Management expanded ROS by 80 bps
December saw broad-based softening
Eldon performance on track in Enclosures
Sales of $2.2 billion, flat year-over-year
ROS was 19.3%, expanded 20 bps; Adjusted EPS of $1.78
Delivered ~100% Free Cash Flow Conversion
Completed Eldon acquisition
2020 Outlook
Reported Sales outlook of flat to 5%, organically down 2 to up 2%
ROS expansion of flat to +30 bps
Adjusted EPS guidance range of $1.85 - $1.95
4Q4 ’19 Earnings Presentation
2019 Priorities
Strong execution in a tougher environment
• Accelerated One nVent initiatives
• Drove key vertical growth
• Launched new products
Organic Growth
• Delivered price + productivity to offset inflation
• Drove supply chain efficienciesMargin Expansion
• Returned cash in form of dividends and repurchases
• Completed Eldon acquisitionCapital Allocation
5Q4 ’19 Earnings Presentation
At nVent: Connect and Protect is our Mission
Accelerate and scale with One nVent
• Protection of Electronics and Data Everywhere
Enclosures
• Connection and Protection for Safety and Security
Thermal Management
• Innovation in Cost-Efficient, Labor-Saving Connections
Electrical & Fastening Solutions
Our Solution:
Favorable trends position
us well:
Electrification of everything
Increased safety and
security
Need for labor-savings
Q4 ’19 nVent Performance
6Q4 ’19 Earnings Presentation
*Non-Cash Amortization
Sales ($ in millions) Financial Highlights (YoY)
Segment Income ($ in millions)
Sales flat, Organic down 3%
• Sales contribution from acquisitions
Price + productivity more than offset inflation
Protected profit
• Return on sales up 10 bps
• All segments expanded return on sales
Adjusted EPS of $0.47
• Up ~4% year-over-year
• Lower tax rate versus expectations
Free Cash Flow of $169 million
Other Items
• Adjusted tax rate of ~18%
• Net interest expense of ~$11M
• Shares of ~171M
($5)
Q4 ’18
($27)
Volume
$8$567
Price FX
$23
Acq. Q4 ’19
$568
$0
Growth/
Acq.
$15*
Q4 ’18
($6)
$8
Price FX
($1)
Net Prod.
$16*
Q4 ’19
$108 $109
ROS
19.1%
ROS
19.2%(0.9%) 1.1% 0.1% (0.2%)
FlatYoY
-5 pts 2 pt 4 pts -1 pt
+ Productivity
- Investments
- Inflation
FlatYoY
Full-Year ’19 nVent Performance
7Q4 ’19 Earnings Presentation
*Non-Cash Amortization
Sales ($ in millions) Financial Highlights (YoY)
Segment Income ($ in millions)
Organic Sales flat
Price + productivity more than offset inflation
Segment Income flat
• Return on sales expanded 20 bps
‒ Enclosures up 40 bps
‒ EFS up 50 bps
Adjusted EPS of $1.78
• Up ~2% year-over-year
Free Cash Flow of $304 million
• ~100% conversion of adjusted net income
Other Items
• Adjusted tax rate of ~18%
• Net interest expense of ~$45M
• Shares of ~173M
FY ’18 Price
($40)
Volume
$38$31
($37)
Acq. FX FY ’19
$2,214 $2,204
$61*
Growth/
Acq.
($4)
FY ’18
($17)
$38
Price FX
($17)
Net Prod.
$61*
FY ’19
$424 $424
ROS
19.1%
ROS
19.3%(0.6%) 1.4% 0.1% (0.7%)
FlatYoY
-2 pts 2 pts 1 pt -1 pts
+ Productivity
- Investments
- Inflation
FlatYoY
8Q4 ’19 Earnings Presentation
Q4 ’19 Segment Performance
Maintained profits in a softer demand environment
En
clo
su
res
Th
erm
al M
gm
tE
FS
─ Slowdown in the Industrial vertical
Strong sales in One nVent initiatives
Eldon contributed ~$23M in Sales
Strong operational performance, positive net productivity
Segment IncomeSales
Expanded ROS by 80 bps, cost-out actions executed
± Backlog up strong double digits while orders were up modestly
─ Commercial sales down low-single digits
Expanded ROS by 130 bps
Positive contributions from Price and Volume
Strong operational performance
Commentary($M)
$256Up 2%
Down 6% organic
$40Up 3%
ROS 15.6% (+10bps)
$169Down 5%
Down 4% organic
$47Down 3%
ROS 27.9% (+80bps)
$142Up 2%
Up 3% organic
$36Up 8%
ROS 25.1% (+130bps)
9Q4 ’19 Earnings Presentation
Full-Year ’19 Segment Performance
Solid execution
En
clo
su
res
Th
erm
al M
gm
tE
FS
Expanded ROS by 40 bps, strong operational performance
Positive contributions from One nVent initiatives
Eldon contributed ~$31M in Sales
─ Slowdown in Industrial vertical during second half
Segment IncomeSales
Orders and backlog grew in 2H
± ROS contracted 10 bps, executed cost-out actions
─ Slowdown in Commercial
Strong organic sales growth
Addressed operational inefficiencies
Expanded ROS by 50 bps
Commentary($M)
$1,034Up 1%
Flat organic
$181Up 4%
ROS 17.5%(+40bps)
$591Down 5%
Down 3% organic
$145Down 6%
ROS 24.6%(-10bps)
$580Up 2%
Up 3% organic
$150Up 4%
ROS 25.8%(+50bps)
Debt Repayments
Acquisitions/Other 56 84
Ending Debt 1,065$ 1,065$
Share Repurchases - 236
(14) (3)
Dividends 30 121
Beginning Debt 1,151$ 942$
Used (Generated) Cash (169) (304)
Q4
Use of Cash: 20192019
Other Accruals/Other
Working Capital 107 6
Free Cash Flow - Total 169$ 304$
(14) 1
Depreciation 9 35
Capital Expenditures (10) (39)
Net Income
Amortization 15 61
Subtotal 77$ 301$
62$ 239$
Q4
2019
CASH FLOW ($M)
2019
10Q4 ’19 Earnings Presentation
Balance Sheet and Cash Flow
Strong balance sheet and free cash flow performance
Debt Roll-Forward ($M)
Debt Summary
2019 Capital Expenditures of ~$39M
2019 D&A of ~$97M + ~$16M of Non-Cash Stock
Compensation
Net debt to EBITDA ratio of 2.1X
$465M revolver available
$800M
$270M
Q4 ‘19
$1,070M
Weighted Average Rate ~4.0%
25% Variable
75% Fixed$300M @ 2023
$500M @ 2028
Maturity
2023
Note: Does not include $106M of cash on hand at quarter-end and $5M of unamortized debt issuance costs
11Q4 ’19 Earnings Presentation
Full-Year 2020 nVent Outlook
Outlook reflects soft macro environment
Key Considerations
Target FCF at 100% of Adjusted Net Income
Expect ~$55 million corporate costs
Capex $40 – 50 million
See softer demand in Industrial vertical during 1H
Depreciation & Amortization ~$100 million
Sales
ROS
Adjusted EPS
Flat – Up 5%
Down 2 – Up 2% Organic
Flat – Up 30 bps
$1.85 – $1.95
Organic Sales by SegmentTotal nVent
Thermal Management
EFS
Down 1 – Up 3%
Flat – Up 3%
Up 3 – 7% including Eldon
Down 3 – Up 1%
Other ItemsNet Int. Exp: $40 – 43M
Tax Rate: 18 – 19%
Shares: 169 – 170M
Enclosures
12Q4 ’19 Earnings Presentation
First Quarter 2020 nVent Outlook
Prepared to execute in tougher macro environment
Summary
Enclosures Industrial sales expected to remain soft
Thermal Management sales expected to remain down while orders and backlog continue to grow
Eldon expected to add ~$20M+ of sales in the quarter
Cost out actions expected to read out; continuing to invest in our strategic growth initiatives
Q1 ‘20 Q1 ’19 Other Items
Reported Sales -1 to 1% $538M Tax Rate 18 to 19%
Organic Sales -4 to -2% Net Interest Expense ~$11M
EPS (adjusted) $0.37 to $0.41 $0.39 Shares ~170M
13Q4 ’19 Earnings Presentation
2020 Priorities
Continue to build a high performance growth company
• Accelerate and expand One nVent initiatives
• Grow sales globally
• Launch record number of new products
Organic Growth
• Expand margins
• Optimize inventory levelsMargin and
Working Capital
• Return cash in form of dividends and repurchases
• Focus on accretive and bolt-on M&ACapital Allocation
14Q4 ’19 Earnings Presentation
Summary
Focused on growth and execution
Strong organic sales growth and ROS expansion in EFS
Eldon is a great strategic fit with a strong IEC product portfolio
Thermal Management gaining traction and building backlog
Continued momentum with our strategic growth initiatives
Expanded margins in a more challenging macro environment
Delivered approximately 100% free cash flow conversion
We are a Leader in Connection and Protection
Appendix and
GAAP to Non-GAAP Measurements & Reconciliations
Reported to Adjusted 2019 Reconciliation
16Q4 ’19 Earnings Presentation
In millions, except per-share data First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
Net sales 538.0$ 539.5$ 559.8$ 566.7$ 2,204.0$
Net income 56.4 60.9 59.9 45.5 222.7
Provision for income taxes 9.7 13.2 13.7 (1.9) 34.7
Income before income taxes 66.1 74.1 73.6 43.6 257.4
Other expense 0.9 1.0 0.9 28.2 31.0
Net interest expense 10.5 11.9 11.6 10.7 44.7
Operating income 77.5 87.0 86.1 82.5 333.1
% of net sales 14.4% 16.1% 15.4% 14.6% 15.1%
Adjustments:
Restructuring and other 3.6 2.7 11.2 6.7 24.2
Acquisition transaction and integration costs - - 1.9 0.5 2.4
Intangible amortization 15.1 15.1 15.4 15.8 61.4
Inventory step-up amortization - - - 3.2 3.2
Segment income 96.2$ 104.8$ 114.6$ 108.7$ 424.3$
Return on sales 17.9% 19.4% 20.5% 19.2% 19.3%
Segment income 96.2$ 104.8$ 114.6$ 108.7$ 424.3$
Depreciation 8.4 8.8 8.9 9.3 35.4
EBITDA - as adjusted 104.6$ 113.6$ 123.5$ 118.0$ 459.7$
Net income - as reported 56.4$ 60.9$ 59.9$ 45.5$ 222.7$
Adjustments to operating income 18.7 17.8 28.5 26.2 91.2
Pension and other post-retirement mark-to-market loss - - - 27.3 27.3
Income tax adjustments (5.6) (3.3) (4.6) (19.3) (32.8)
Net income - as adjusted 69.5$ 75.4$ 83.8$ 79.7$ 308.4$
Diluted earnings per ordinary share
Diluted earnings per ordinary share - as reported 0.32$ 0.35$ 0.35$ 0.27$ 1.29
Adjustments 0.07 0.09 0.14 0.20 0.49
Diluted earnings per ordinary share - as adjusted 0.39$ 0.44$ 0.49$ 0.47$ 1.78
nVent Electric plc
Reconciliation of GAAP to non-GAAP financial measures for the year ended December 31, 2019
excluding the effect of 2019 adjustments (Unaudited)
Reported to Adjusted 2018 Reconciliation
17Q4 ’19 Earnings Presentation
In millions, except per-share data First Quarter Second Quarter Third Quarter Fourth Quarter Full Year
Net sales 538.9$ 542.7$ 563.9$ 568.1$ 2,213.6$
Net income 52.3 43.3 68.2 67.0 230.8
Provision for income taxes 11.5 7.6 12.9 5.9 37.9
Income before income taxes 63.8 50.9 81.1 72.9 268.7
Other Expense 1.2 5.1 0.9 3.7 10.9
Net interest expense 0.6 9.3 11.7 9.6 31.2
Operating income 65.6 65.3 93.7 86.2 310.8
% of net sales 12.2% 12.0% 16.6% 15.2% 14.0%
Adjustments:
Restructuring and other 2.8 2.3 1.3 1.3 7.7
Intangible amortization 15.4 15.2 15.2 15.1 60.9
Separation costs 9.7 24.8 4.8 5.7 45.0
Corporate allocations - (0.8) - - (0.8)
Segment income 93.5$ 106.8$ 115.0$ 108.3$ 423.6$
Return on sales 17.4% 19.7% 20.4% 19.1% 19.1%
Segment income 93.5$ 106.8$ 115.0$ 108.3$ 423.6$
Depreciation 9.2 9.1 9.3 8.6 36.2
EBITDA - as adjusted 102.7$ 115.9$ 124.3$ 116.9$ 459.8$
Net income - as reported 52.3$ 43.3$ 68.2$ 67.0$ 230.8$
Interest expense adjustment - pro forma (5.6) - - - (5.6)
Adjustments to operating income 27.9 41.5 21.3 22.1 112.8
Pension and other post-retirement mark-to-market loss - 4.1 - 2.9 7.0
Income tax adjustments (4.0) (9.8) (5.5) (11.7) (31.0)
Net income - pro forma adjusted 70.6$ 79.1$ 84.0$ 80.3$ 314.0$
Diluted earnings per ordinary share - pro forma adjusted
Diluted earnings per ordinary share - pro forma 0.29$ 0.24$ 0.38$ 0.37$ 1.28$
Adjustments 0.10 0.20 0.08 0.08 0.46
Diluted earnings per ordinary share - pro forma adjusted 0.39$ 0.44$ 0.46$ 0.45$ 1.74$
nVent Electric plc
excluding the effect of 2018 adjustments (Unaudited)
Reconciliation of GAAP to non-GAAP financial measures for the year ended December 31, 2018
Reported to Adjusted 2020 Reconciliation
18Q4 ’19 Earnings Presentation
In millions, except per-share data First Quarter Full Year
Net sales 2,270$
Operating income 375
% of net sales 17%
Adjustments:
Intangible amortization 63
Segment income 438$
Return on sales 19%
Net income - as reported 53$ 271$
Adjustments to operating income 16 63
Income tax adjustments (3) (11)
Net income - as adjusted 66$ 323$
Diluted earnings per ordinary share
Diluted earnings per ordinary share - as reported $0.29 - $0.33 $1.55 - $1.65
Adjustments 0.08 0.30
Diluted earnings per ordinary share - as adjusted $0.37 - $0.41 $1.85 - $1.95
(1) Forecast information represents an approximation
nVent Electric plc
Reconciliation of GAAP to non-GAAP financial measures for the year ended December 31, 2020
excluding the effect of 2020 adjustments (Unaudited)
Forecast (1)
Organic Sales Growth & Free Cash Flow Reconciliation
19Q4 ’19 Earnings Presentation
Organic Currency Acq./Div. Total Organic Currency Acq./Div. Total
nVent (3.4%) (0.9%) 4.0% (0.3%) (0.2%) (1.6%) 1.4% (0.4%)
Enclosures (6.4%) (0.8%) 9.2% 2.0% (0.3%) (1.3%) 3.0% 1.4%
Thermal Management (4.4%) (1.0%) 0.0% (5.4%) (2.8%) (2.4%) —% (5.2%)
Electrical & Fastening Solutions 3.1% (0.8%) 0.0% 2.3% 3.0% (1.4%) —% 1.6%
Organic Currency Acq./Div. Total Organic Currency Acq./Div. Total
nVent (4) - (2)% (1%) 4% (1) - 1% (2) - 2% (1) - 0% 3% 0 - 5%
Enclosures (3) - 1% —% 6% 3 - 7%
Thermal Management (1) - 3% —% —% (1) - 3%
Electrical & Fastening Solutions 0 - 3% —% —% 0 - 3%
In millions
Net cash provided by (used for) operating activities
Capital expenditures
Proceeds from sale of property and equipment
Free cash flow 169.2$
178.8$
(1) Forecast information represents an approximation
Full Year Net Sales GrowthQ1 Net Sales Growth
303.8$
Reconciliation of cash from operating activities to free cash flow (Unaudited)
Twelve months ended
December 31, 2019
(9.8)
0.2
(38.8)
6.3
December 31, 2019
336.3$
Three months ended
Reconciliation of Net Sales Growth to Organic Net Sales Growth by Segment
for the quarter ended March 31, 2020 and the year ended December 31, 2020 (Unaudited)
Forecast (1)
nVent Electric plc
Reconciliation of Net Sales Growth to Organic Net Sales Growth by Segment
for the quarter and year ended December 31, 2019 (Unaudited)
Q4 Net Sales Growth Full Year Net Sales Growth